Fed's Cautious Tone Boosts USDX; Tech Earnings Mixed

The EUR/USD pair fell over 0.40% on Wednesday after Federal Reserve Chair Jerome Powell delivered what markets described as a “hawkish cut.” While the Fed reduced rates by 25 basis points to 3.75%–4.00%, Powell emphasized that another reduction in December is “far from a foregone conclusion.”

During his post-meeting press conference, Powell highlighted divisions within the Federal Open Market Committee (FOMC), noting that several members believe the current policy rate may already be “at or near neutral.” He added that “there’s a sense that some officials would like to move to the sidelines,” hinting that the Fed may pause rate adjustments in the near term.

Attention now turns to the European Central Bank (ECB), which will announce its monetary policy decision on Thursday. Markets widely expect President Christine Lagarde and the Governing Council to keep rates unchanged, as policymakers assess the eurozone’s fragile growth outlook.

Elsewhere, traders are monitoring progress toward a potential US–China trade agreement, ahead of a meeting between President Donald Trump and Chinese President Xi Jinping in South Korea on Thursday.

In Europe, political uncertainty in France remains in focus, with the Socialist Party threatening to block the government’s budget unless it includes a substantial wealth tax increase by week’s end.

Gold prices eased from session highs on Wednesday after the Federal Reserve delivered a widely expected 25-basis-point rate cut, but Chair Jerome Powell’s cautious tone damped expectations for further easing this year.

His comments prompted traders to scale back bets on another cut, pushing the U.S. dollar higher and limiting gold’s earlier gains.

Gold, a non-yielding asset, typically benefits from lower interest rates and economic uncertainty. Powell’s tone, viewed as a “hawkish cut,” reduced near-term momentum for bullion.

On the trade front, U.S. President Donald Trump announced a trade deal with South Korea and voiced optimism about reaching a truce with China’s President Xi Jinping ahead of their meeting on Thursday — developments that also curbed safe-haven demand.

Despite this week’s pullback, gold remains up 51% year-to-date after touching a record high on October 20, though it has fallen more than 3% so far this week amid easing trade tensions.

Oil prices posted minor gains on Wednesday after data showed U.S. crude and fuel inventories fell more than expected, while a positive outlook from U.S. President Donald Trump on upcoming trade talks with China’s President Xi Jinping helped ease global demand concerns.

The U.S. Energy Information Administration (EIA) reported that crude oil inventories dropped by nearly 7 million barrels last week, far exceeding analyst expectations for a 211,000-barrel decline. Stocks of gasoline and distillate fuels also fell more than anticipated, underscoring stronger-than-expected U.S. demand.

The steep drawdown forced traders to reconsider expectations of a looming supply glut, given record U.S. production and increased OPEC+ output.

Adding to bullish sentiment, President Trump predicted a “good outcome” from his meeting with China’s Xi Jinping, scheduled for Thursday at a summit in South Korea.

At the same summit, the U.S. and South Korea finalized details of a long-delayed trade deal, which market participants viewed as another sign of easing trade friction.

Elsewhere, the Federal Reserve cut interest rates by 25 basis points on Wednesday, as expected. However, Chair Jerome Powell’s cautious remarks on future policy steps injected some uncertainty into broader market sentiment.

The US 500 closed slightly lower on Wednesday, retreating from an intraday record high after the Federal Reserve delivered a widely expected 25-basis-point rate cut but cooled expectations for additional easing later this year.

The Fed reduced the benchmark federal funds rate by 0.25 percentage points — the second cut of 2025 — citing signs of a softening labor market. Policymakers also announced plans to end quantitative tightening (QT) in December, signaling a full stop to balance sheet reductions.

Investor attention now turns to a wave of Big Tech earnings set to shape market sentiment through the remainder of the week.

Microsoft, Meta Platforms, and Alphabet are due to report results after Wednesday’s close, followed by Apple and Amazon on Thursday.

Given their massive market capitalization and influence, these reports are expected to heavily influence the S&P 500’s direction heading into the final months of 2025.

Nvidia remained a key talking point as the chipmaker inches closer to becoming the first $5 trillion company. Market sentiment was buoyed by reports that President Donald Trump plans to discuss Nvidia’s Blackwell AI processors with China’s President Xi Jinping during talks this week in South Korea.

Trump has hinted at allowing the company to export downgraded versions of its advanced AI chips to China — a move that could signal a potential softening of U.S. export restrictions and mark a turning point in U.S.-China tech relations.